Ok. The MT Gox situation is a lesson for the whole BTCommunity to learn. We did. Now it is time to think about the future. It is clear that the current exchange model has flaws and it needs to evolve. We, the people in this community, are one of the smartest groups of people on the planet, yet this issue made us look like fools for a while, but that is the past. If when Mt. Gox returns to business we should all support it as usual, but, we need to start coding the new system ASAP.

I'll take the simplest case. Exchange of USD to BTC and back. Payments: BTC - the blockchain, USD - PayPal.

I'll take for granted, that someone will write P2P matching software which everyone runs on his computers.

+ Damn convenient - Security, security, security

Next the risk of counter-party chargeback. How it can be reduced?

Reputation.

Proof of work. In order to place an ask/bid some rather expensive computation has to be performed. So that, say, only half of existing bitcoins can be exchanged every 24 hours. The same is true for holders of PayPal accounts, which will also have to provide proof of work in order to ask/bid. Or maybe only for them, since BTC transactions are irreversible.

Insurers. Can work, but introduces some elements of centralization. Like exchanges.

Automatic mixing of payments. Not receiving payments from one individual account, but from many. Ideally so, that ratio of fresh/untested PayPal account will be less than 10% initially and 1% when the system will be established.

Different exchange ratios for tested/tested PayPal accounts

.

So this is my proposal. Feel free to rip it apart. I'm not (yet) emotionally attached to it

Ok. The MT Gox situation is a lesson for the whole BTCommunity to learn. We did. Now it is time to think about the future. It is clear that the current exchange model has flaws and it needs to evolve. We, the people in this community, are one of the smartest groups of people on the planet, yet this issue made us look like fools for a while, but that is the past. If when Mt. Gox returns to business we should all support it as usual, but, we need to start coding the new system ASAP.

This Topic is where the new Decentralized Exchange Service is Born.

Why create one central decentralized exchange, when you can just create many decentralized independent exchanges?

As an individual just don't use the monopoly (where the Lemmings go), but one of the other exchanges.

While I have a Mt. Gox account I did all my recent trades over Bitmarket and so I did not have to care about the Mt. Gox problems at all.

Unfortunately it seems that all the Lemmings are moving now to TradeHill. Instead of learning something from the Mt. Gox fail everyone switches to the same exchange waiting for the next crash.

In my opinion, the system needs to be a software exactly like bitcoin, you run it whenever you want to make an exchange and the same block systems confirms with all the nodes the transaction. The other currency needed to make the trade happen is Liberty Reserve because it is also instant, anonymous, and No Chargebacks are possible.

I do not see why this would be impossible. I see the biggest problem is that the time it takes to transact an exchange and also guarantee payment between both parties. I think that maybe a rating system would help with the guaranteed payment. Start small with exchanges and earn a reputation for honest exchanges. As for the time it take for a transaction to take place I would think that a block chain would have to solve blocks quicker then 6 an hour. Maybe something similar to namecoin. With a high enough transaction fee I could see transactions taking priority and moving from peer to peer rather quickly. If you are not in a rush you could use a lower transaction fee. Money could be exchanged in person(long/lat), western union, paypal, dwolla, coinshop/merchant etc. Part of the transaction and exchange would be listing your payment choices and bids or asks to find a suitable person or business to exchange with.

I do not see why this would be impossible. I see the biggest problem is that the time it takes to transact an exchange and also guarantee payment between both parties. I think that maybe a rating system would help with the guaranteed payment. Start small with exchanges and earn a reputation for honest exchanges. As for the time it take for a transaction to take place I would think that a block chain would have to solve blocks quicker then 6 an hour. Maybe something similar to namecoin. With a high enough transaction fee I could see transactions taking priority and moving from peer to peer rather quickly. If you are not in a rush you could use a lower transaction fee. Money could be exchanged in person(long/lat), western union, paypal, dwolla, coinshop/merchant etc. Part of the transaction and exchange would be listing your payment choices and bids or asks to find a suitable person or business to exchange with.

- Dukejer

Thank You, please people, take example of this post and lets try to focus the positive ideas. We can make this happen if we combine our thoughts and ideas!